After a year of enticingly low interest rates, soaring house prices and enthusiastic investors, what can we expect from the property market in 2015?
Capital city home prices rose almost eight per cent in 2014, and unsurprisingly, Sydney led the charge with growth of more than 12 per cent, according to the latest figures.
But if you’re banking on prices continuing to skyrocket, you’ll likely be disappointed, property experts say. “We’ve got a storm that’s brewing which is going to take the top off a housing market that was already slowing,” says John Edwards, founder of residential research company Residex.
“2015 is unlikely to be a good year for sellers – it’s more likely to be a buyers’ market.” Most markets are oversupplied with apartments and consumer confidence looks likely to remain in the doldrums for a while yet, restraining price growth, Mr Edwards said.
Prices could fall in some areas but overall, most markets should experience growth in line with inflation, somewhere between two and three per cent, he said. Douglas Driscoll, chief executive of real estate group Starr Partners, expects the market will continue to grow, but at a steadier pace than 2014, with growth between six and eight per cent in Sydney.
Not even a cash rate cut by the Reserve Bank could stoke another price surge, he said. “I think it’s going to go from a white-hot market to a red-hot market,” Mr Driscoll said. “I can’t honestly see the market getting any stronger because this is a once-in-a-generation market – it’s the best market that the absolute vast majority of people in the industry have ever witnessed.
“If we saw a repeat of 2014, we’d run the risk of entering a property bubble.” Mr Driscoll says investor activity is likely to step up even further, despite moves by regulators to curb it, squeezing first-home buyers to new record lows (four to five per cent). More foreign investors will pour into the market, he said, likely bringing that debate to fever pitch in 2015.
“Something has got to give,” Mr Driscoll said. “We’re creating a bottleneck environment where lots of these properties are going to be tied up with these investors and inadvertently, in the medium to long term, we’re going to create a generation of renters.” CoreLogic RP Data head of research Tim Lawless said Brisbane, Adelaide and Hobart were the cities to watch for a stronger performance in 2015.
Any RBA rate cuts would be tempered by low consumer confidence and high unemployment, while a clamp down on investment lending by regulators would dampen investor demand, he said.
CAPITAL CITY FORECASTS FOR 2015
SYDNEY – Slower price growth, reduced investor activity
MELBOURNE – Slower price growth, reduced investor demand, housing oversupply
BRISBANE – Price growth to outperform capital city average
ADELAIDE – Modest price rises expected PERTH – Prices could fall as mining investment slows
HOBART – Moderate price rises, rising demand from lifestyle buyers
DARWIN – Lower price growth as major infrastructure projects wind down
CANBERRA – Government job cuts and housing oversupply could mean flat to falling prices
Source: CoreLogic RP Data